Trusts at maturity of policy
Elaine2685
Member
Hi,
I am still relatively new to all this and was wondering if anyone can provide advice and guidance on a query.
I come across a lot of trusts and have studied it a bit but was wondering if someone could kindly explain what happens to a trust when a policy i.e. endowment, investment bond, reaches its maturity date.
I am under the impression that the trust would effectively end at the police's maturity date anf the policy would revert back to the settlor and that the maturity value payable would be payable to the settlor. Is this correct?
If so, would this mean that any forms required to claim the maturity value would only need to be completed and signed by the original policyholder/settlor and not by the trustees(s)?
I sorry if this is a stupid question but I've tried to find detail about this online but I haven't been able to find a lot on this topic.
Any advice you can give is greatly appreciated.
Thanks,
Elaine
I am still relatively new to all this and was wondering if anyone can provide advice and guidance on a query.
I come across a lot of trusts and have studied it a bit but was wondering if someone could kindly explain what happens to a trust when a policy i.e. endowment, investment bond, reaches its maturity date.
I am under the impression that the trust would effectively end at the police's maturity date anf the policy would revert back to the settlor and that the maturity value payable would be payable to the settlor. Is this correct?
If so, would this mean that any forms required to claim the maturity value would only need to be completed and signed by the original policyholder/settlor and not by the trustees(s)?
I sorry if this is a stupid question but I've tried to find detail about this online but I haven't been able to find a lot on this topic.
Any advice you can give is greatly appreciated.
Thanks,
Elaine
Comments
Hi Elaine,
If a policy is held in trust, it is owned by the trustees and so when it matures, the policy proceeds will be paid to the trust to be either distributed or reinvested by the trustees.
It is possible for a settlor to benefit from a trust they set up but the gift will have be classed as a gift with reservation, so not effective for IHT purposes. If the trust was set up for IHT reduction in the first place, then it is likely the settlor will have been excluded from future benefit.
It will all depend on the wording of the trust, but policy proceeds are paid to the policy owners, who will always be the trustees if a plan is held in trust.
Thank you so much for your comprehensive answer!
I had thought that initially but then kept coming across things that was making me doubt what was right and what was wrong and I had been finding it hard to find a definitive answer.
Thank you so much for clarifying this for me!
Your help is greatly appreciated!
Hi Elaine
The only real exception to what Caro says is if the trust is a flexible reversionary trust- the most common being the Canada Life International Wealth Preservation Account (although Quilter and IOMA also have versions of this). Whilst not as common as a standard discretionary trust, or discounted gift trust, it is worth knowing about in case you come across any.
This is an IHT planning trust which gives the settlor limited access to the trust fund each year and at the same time, avoids the gift with reservation rules. Each year a cluster of policies in the trust matures and unless the trustees choose to extend the maturity date to a new point in the future, the maturity proceeds are paid back to the settlor automatically. For these type of trusts, you only need to complete a form to defer the maturing policies (which are sent to the trustees automatically each year).
Cheers
Tom